As home mortgage interest rates in India continue to rise, Indian homebuyers are unable to purchase as much house with their incomes as they could as recently as last year, experts reported at the Cityscape USA conference in New York this week.

Home mortgage rates in India stood at about 8% early last year, and have now risen close to 13%. Higher interest rates on home mortgages mean that an Indian homebuyer’s purchasing ability has dropped to five times the amount of income, from seven times the amount of income in 2007.

The decline in purchasing power means that an inventory of high-end for-sale apartments in that country could see a price correction of roughly 20%, according to Shekar Narasimhan, CEO of Beekman Helix India, a U.S. investment management firm based in McLean, Va., that focuses on Indian real estate investments.

Narasimhan, who spoke at a conference session on investing in the Indian market, sees more demand for mid-range apartment units in India. A target audience of about 20 million Indian households would be interested in buying mid-priced apartment units for about $60,000 each, he said.

Pricing a unit at $60,000 does not mean compromising on quality, but rather cutting down on amenities in the apartment buildings, according to Narasimhan. He believes that combining middle-end apartment complexes with office and other mixed-uses would make for a “winning formula.”

Commercial real estate investors see opportunity in India largely because of urban demographic projections. According to Prudential Real Estate Investors, about 40% of the Indian population will live in urban areas by 2020, compared with about 30% of the population living there now.

One shortcoming for investors considering Indian opportunities is that “patience is not a virtue but a necessity in India,” Narasimhan noted. Other India experts attending Cityscape noted that opportunities in the market can prove chaotic, and the transaction process is punctuated by a slow-moving legal system. Other roadblocks to success include securing clear title to property, as well as incidents of business and government corruption and infrastructure failures.

In addition, the Indian economy has slowed after years of booming growth, and inflation now stands at a 16-year high. This means that demand for commercial real estate also is likely to slow.

India opened up its real estate sector to foreign investment in 2005. To date, Beekman Helix India has invested about $250 million there over the last two and a half years.